What is a corporation in the context of legal entities?

In the context of legal entities, a corporation is defined as a legal entity that is separate from its owners (the shareholders). This means that the corporation can enter into contracts, sue and be sued, and own assets independently of its shareholders. Shareholders invest in the corporation by purchasing shares, which represent their ownership stake in the business. This structure provides certain advantages, such as limited liability, where shareholders are typically not personally liable for the debts and obligations of the corporation beyond the amount they invested. Therefore, the definition of a corporation being a legal entity owned by shareholders encapsulates its fundamental characteristics in the legal framework.

The other options reflect incorrect or incomplete ideas about the nature of a corporation. An informal group of individuals doesn’t possess the legal status that characterizes a corporation. A contract between multiple parties is a legal agreement but does not constitute a legal entity. Lastly, while a non-profit organization can also be a type of corporation, treating a corporation as strictly a type of non-profit organization overlooks the broader category of for-profit corporations that are common in business.